[Introduced January 25, 2011; referred to the Committee on
Banking and Insurance.]

____________

A BILL to amend and reenact §33-27-2, §33-27-2a, §33-27-3,
§33-27-4, §33-27-5, §33-27-6, §33-27-7, §33-27-9, §33-27-11
and §33-27-14 of the Code of West Virginia, 1931, as amended;
and to amend said code by adding thereto two new sections,
designated §33-27-3a and §33-27-6a, all relating to insurance
holding company systems; defining terms; excluding certain
investments from determination of adequacy of surplus;
requiring notice and other information with regard to
divestiture or acquisition of a controlling interest; changing
public hearing requirements; providing standards for review of
acquisition request by commissioner; establishing process for
consolidated hearings; providing standards and procedures for
certain acquisitions not otherwise covered; expanding types of
information that may be demanded and reviewed by the
commissioner; providing for establishment of supervisory
colleges; providing additional confidentiality measures; and

authorizing emergency rules.

Be it enacted by the Legislature of West Virginia:

That §33-27-2, §33-27-2a, §33-27-3, §33-27-4, §33-27-5,
§33-27-6, §33-27-7, §33-27-9, §33-27-11 and §33-27-14 of the Code
of West Virginia, 1931, as amended, be amended and reenacted; and
that said code be amended by adding thereto two new sections,
designated §33-27-3a and §33-27-6a, all to read as follows:

ARTICLE 27. INSURANCE HOLDING COMPANY SYSTEMS.

§33-27-2. Definitions.

As used in this article:

(a) An "affiliate" of or person "affiliated" with a specific
person is a person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with the person specified.

(b) "Commissioner" means the West Virginia Insurance
Commissioner, his or her deputies or the insurance departmentWest
Virginia offices of the Insurance Commissioner, as appropriate.

(c) "Control" (including the terms "controlling", "controlled
by" and "under common control with") means the possession, direct
or indirect, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership
of voting securities, by contract other than a commercial contract
for goods or nonmanagement services or otherwise, unless the power
is the result of an official position with or corporate office held
by the person. Control shall be presumed to exist if any person,
directly or indirectly, owns, controls, holds with the power to
vote or holds proxies representing ten percent or more of the
voting securities of any other person. or controls or appoints a
majority of the board of directors, voting members or similar
governing body of any other person. This presumption may be
rebutted by a showing made in the manner provided by subsection (l)(k), section four of this article that control does not exist in
fact. The commissioner may determine after furnishing all persons
in interest notice and opportunity to be heard and making specific
findings of fact to support the determination that control exists
in fact notwithstanding the absence of a presumption to that
effect.

(d) “Depository institution” means a bank or savings
association as those terms are defined in section three of the
federal deposit insurance act. The term “depository institution”
does not include an insurance company.

(d) “Enterprise risk” means any activity, circumstance, event
or series of events involving one or more affiliates of an insurer
that, if not remedied promptly, is likely to have a material
adverse effect upon the financial condition or liquidity of the
insurer or its insurance holding company system as a whole,
including, but not limited to, anything that would cause the
insurer's risk-based capital to fall into company action level, as
set forth in article forty of this chapter, or would cause the
insurer to be in hazardous financial condition, as set forth in
article thirty-four of this chapter.

(e) "Insurance holding company system" consists of two or more
affiliated persons, one or more of which is an insurer.

(f) "Insurer" means any person or persons or corporation,
partnership or company authorized by the laws of this state to
transact the business of insurance in this state, except that it
shall not include agencies, authorities or instrumentalities of the
United States, its possessions and territories, the commonwealth of
Puerto Rico, the District of Columbia or a state or political
subdivision of a state.

(g) “Person” means an individual, a corporation, a limited
liability company, a partnership, an association, a joint-stock
company, a trust, an unincorporated organization, a depository
institution or any other legalsimilar entity or any combination of
the foregoing acting in concert, but does not include any
securities broker performing no more than the usual and customary
broker’s function and holding less than twenty percent of the
voting securities of an insurance company or of any person which
controls an insurance companydoes not include any joint venture
partnership exclusively engaged in owning, managing, leasing or
developing real or tangible personal property.

(h) A "security holder" of a specified person is one who owns
any security of such person, including common stock, preferred
stock, debt obligations and any other security convertible into or
evidencing the right to acquire any of the foregoing.

(i) A "subsidiary" of a specified person is an affiliate
controlled by such person directly or indirectly through one or
more intermediaries.

(j) "Voting security" includes any security convertible into
or evidencing a right to acquire a voting security.

(a) Authorization. – Any domestic insurer, either by itself or
in cooperation with one or more persons, may organize or acquire
one or more subsidiaries engaged in the following kinds of business
with the commissioner's prior approval:

(1) Any kind of insurance business authorized by the
jurisdiction in which it is incorporated;

(2) Acting as an insurance agent for its parent or for any of
its parent's insurer subsidiaries;

(3) Investing, reinvesting or trading in securities for its
own account, that of its parent, any subsidiary of its parent, or
any affiliate or subsidiary;

(4) Management of any investment company subject to or
registered pursuant to the Investment Company Act of 1940, as
amended, including related sales and services;

(5) Acting as a broker-dealer subject to or registered
pursuant to the Securities Exchange Act of 1934, as amended;

(6) Rendering investment advice to governments, government
agencies, corporations or other organizations or groups;

(8) Ownership and management of assets which the parent
corporation could itself own or manage;

(9) Acting as administrative agent for a governmental
instrumentality which is performing an insurance function;

(10) Financing of insurance premiums, agents and other forms
of consumer financing;

(11) Any other business activity determined by the
commissioner to be reasonably ancillary to an insurance business;
and

(12) Owning a corporation or corporations engaged or organized
to engage exclusively in one or more of the businesses specified in
this section; and

(13) Organizing or acquiring one or more subsidiaries that are
depository institutions.

(b) Additional investment authority. -- In addition to
investments in common stock, preferred stock, debt obligations and
other securities permitted under any other provision of this
chapter, a domestic insurer may also with the commissioner's prior
approval:

(1) Invest in common stock, preferred stock, debt obligations
and other securities of one or more subsidiaries, amounts which do
not exceed the lesser of ten percent of the insurer's assets or
fifty percent of the insurer's surplus as regards policyholders:
Provided, That after the investments, the insurer's surplus as
regards policyholders will be reasonable in relation to the
insurer's outstanding liabilities and adequate to its financial
needs. In calculating the amount of the investments, investments
in domestic or foreign insurance subsidiaries shall be excluded and
there shall be included:

(A) Total net moneys or other consideration expended and
obligations assumed in the acquisition or formation of a
subsidiary, including all organizational expenses and contributions
to capital and surplus of the subsidiary whether or not represented
by the purchase of capital stock or issuance of other securities;
and

(B) All amounts expended in acquiring additional common stock,
preferred stock, debt obligations and other securities, and all
contributions to the capital or surplus, of a subsidiary subsequent
to its acquisition or formation;

(2) Invest any amount in common stock, preferred stock, debt
obligations and other securities of one or more subsidiaries
engaged or organized to engage exclusively in the ownership and
management of assets authorized as investments for the insurer:
Provided, That each subsidiary agrees to limit its investments in
any asset so that the investments will not cause the amount of the
total investment of the insurer to exceed any of the investment
limitations specified in subdivision (1) of this subsection or in
article eight of this chapter applicable to the insurer. For the
purpose of this subdivision, "the total investment of the insurer"
includes:

(A) Any direct investment by the insurer in an asset; and

(B) The insurer's proportionate share of any investment in an
asset by any subsidiary of the insurer, which shall be calculated
by multiplying the amount of the subsidiary's investment by the
percentage of the ownership of the subsidiary.

(3) With the approval of the commissioner, invest any greater
amount in common stock, preferred stock, debt obligations or other
securities of one or more subsidiaries: Provided, That after
investment the insurer's surplus as regards policyholders will be
reasonable in relation to the insurer's outstanding liabilities and
adequate to its financial needs.

(c) Exemption from investment restrictions. -- Investments in
common stock, preferred stock, debt obligations or other securities
of subsidiaries made pursuant to subsection (b) of this section are
not subject to any of the otherwise applicable restrictions or
prohibitions contained in this chapter applicable to the
investments of insurers.

(d) Qualification of investment; when determined. -- Whether
any investment made pursuantto subsection (a) or (b) of this
section meets the applicable requirements of said subsectionsthat
subsection is to be determined before the investment is made, by
calculating the applicable investment limitations as though the
investment had already been made, taking into account the then
outstanding principal balance on all previous investments in debt
obligations, and the value of all previous investments in equity
securities as of the day they were made, net of any return of
capital invested, not including dividends.

(e) Cessation of control. -- If an insurer ceases to control
a subsidiary, it shall dispose of any investment in the subsidiary
made pursuant to this section within three years from the time of
the cessation of control or within any further time prescribed by
the commissioner, unless at any time after the investment was made,
the investment meets the requirements for investment under any
other provision of this chapter and the insurer has notified the
commissioner of compliance with the provisions of this chapter.

§33-27-3. Acquisition of control of or merger with domestic
insurer; filing requirements; statements;
alternative filing material; approval by the
commissioner; hearings; notice; mailings to
shareholders; expenses; exemptions; violations and
jurisdiction.

(a) Filing requirements. --

(1)AnyNo person other than the issuer shall notmay make a
tender offer for or a request or invitation for tenders of, or
enter into any agreement to exchange securities for, seek to
acquire or acquire, in the open market or otherwise, any voting
security of a domestic insurer if, after the consummation thereof,
the person would, directly or indirectly (or by conversion or by
exercise of any right to acquire) be in control of the insurer and
a person shall not enter into an agreement to merge with or
otherwise to acquire control of a domestic insurer or any person
controlling a domestic insurer unless at the time any suchthe
offer, request or invitation is made or any suchthe agreement is
entered into, or prior to the acquisition of suchthe securities if
no offer or agreement is involved, the person has filed with the
commissioner and has sent to the insurer and, to the extent
permitted by applicable federal laws, rules and regulations, the
insurer has sent to its shareholders a statement containing the
information required by this section and the offer, request,
invitation, agreement or acquisition has been approved by the
commissioner in the manner hereinafter prescribed.

(2) For purposes of this section, any controlling person of a
domestic insurer seeking to divest its controlling interest in the
domestic insurer, in any manner, shall file with the commissioner,
with a copy to the insurer, confidential notice of its proposed
divestiture at least thirty days prior to the cessation of control.
The commissioner shall determine those instances in which the party
or parties seeking to divest or to acquire a controlling interest
in an insurer will be required to file for and obtain approval of
the transaction. The information shall remain confidential until
the conclusion of the transaction unless the commissioner, in his
or her discretion, determines that confidential treatment will
interfere with enforcement of this section. If the statement
referred to in subsection (a) of this section is otherwise filed,
this subdivision does not apply.

(3) With respect to a transaction subject to this section, the
acquiring person must also file a preacquisition notification with
the commissioner, which shall contain the information set forth in
subdivision (1), subsection (c), section three-a of this article.
A failure to file the notification may subject the person to
penalties specified in subdivision (3), subsection (e), section
three-a of this article.

(b)(4) For purposes of this section, a "domestic insurer"
includes any other person controlling a domestic insurer unless the
other person as determined by the commissioner is either directly
or through its affiliates primarily engaged in business other than
the business of insurance. For purposes of this section, “person”
does not include any securities broker holding, in the usual and
customary broker’s function, less than twenty percent of the voting
securities of an insurance company or of any person that controls
an insurance company.

(c)(b) Content of statement. -- The statement to be filed
with the commissioner hereunder shall be made under oath or
affirmation and shall contain the following information:

(1) The name and address of each person by whom or on whose
behalf the merger or other acquisition of control referred to in
subsection (a) of this section is to be effected (hereinafter
called "acquiring party"); and

(2)(A) If such person is an individual, his or her principal
occupation and all offices and positions held during the past five
years and any conviction of crimes other than minor traffic
violations during the past ten years; or

(3)(B) If suchthe person is not an individual, a report of
the nature of its business operations during the past five years or
for such lesser period as the person and any predecessors thereof
shall have been in existence; an informative description of the
business intended to be done by the person and the person’s
subsidiaries; and a list of all individuals who are or who have
been selected to become directors or executive officers of the
person, or who perform or will perform functions appropriate to
those positions. The list shall include for each individual the
information required by subdivisionparagraph (2) of this
subsectionsubdivision;

(4)(2) The source, nature and amount of the consideration
used or to be used in effecting the merger or other acquisition of
control, a description of any transaction wherein funds were or are
to be obtained for any such purpose, including any pledge of the
insurer’s stock or the stock of any of its subsidiaries or
controlling affiliates, and the identity of persons furnishing such
consideration: Provided, That where a source of the consideration
is a loan made in the lender’s ordinary course of business, the
identity of the lender shall remain confidential if the person
filing the statement so requests;

(5)(3) Fully audited financial information as to the earnings
and financial condition of each acquiring party for the preceding
five fiscal years of each acquiring party (or for such lesser
period as each acquiring party and any predecessors thereof shall
have been in existence) and similar unaudited information as of a
date not earlier than ninety days prior to the filing of the
statement;

(6)(4) Any plans or proposals which each acquiring party may
have to liquidate the insurer, to sell its assets or merge or
consolidate it with any person or to make any other material change
in its business or corporate structure or management;

(7)(5) The number of shares of any security referred to in
subsection (a) of this section which each acquiring party proposes
to acquire and the terms of the offer, request, invitation,
agreement or acquisition referred to in saidthat subsection and a
statement as to the method by which the fairness of the proposal
was arrived at;

(8)(6) The amount of each class of any security referred to
in subsection (a) of this section which is beneficially owned or
concerning which there is a right to acquire beneficial ownership
by each acquiring party;

(9)(7) A full description of any contracts, arrangements or
understanding with respect to any security referred to in
subsection (a) of this section in which any acquiring party is
involved, including, but not limited to, transfer of any of the
securities, joint ventures, loan or option arrangements, puts or
calls, guarantees of loans, guarantees against loss or guarantees
of profits, division of losses or profits or the giving or
withholding of proxies. The description shall identify the persons
with whom such contracts, arrangements or understandings have been
entered into;

(10)(8) A description of the purchase of any security
referred to in subsection (a) of this section during the twelve
calendar months preceding the filing of the statement by any
acquiring party, including the dates of purchase, names of the
purchasers and consideration paid or agreed to be paid therefor;

(11)(9) A description of any recommendations to purchase any
security referred to in subsection (a) of this section made during
the twelve calendar months preceding the filing of the statement by
an acquiring party or by anyone based upon interviews or at the
suggestion of the acquiring party;

(12)(10) Copies of all tender offers for, requests or
invitations for tenders of, exchange offers for and agreements to
acquire or exchange any securities referred to in subsection (a) of
this section and, if distributed, of additional soliciting material
relating thereto;

(13)(11) The terms of any agreement, contract or
understanding made with any broker-dealer as to solicitation of
securities referred to in subsection (a) of this section for tender
and the amount of any fees, commissions or other compensation to be
paid to broker-dealers with regard thereto; and

(12) An agreement by the person required to file the statement
referred to in subsection (a) of this section that it will provide
the annual report, specified in subsection (l), section four of
this article, for so long as control exists;

(13) An acknowledgment by the person required to file the
statement referred to in subsection (a) of this section that the
person and all subsidiaries within its control in the insurance
holding company system will provide information to the commissioner
upon request as necessary to evaluate enterprise risk to the
insurer; and

(14) Any additional information as the commissioner may by
rule prescribe as necessary or appropriate for the protection of
policyholders and security holders of the insurer or in the public
interest.

(d)(c) If the person required to file the statement referred
to in subsection (a) of this section is a partnership, limited
partnership, syndicate or other group, the commissioner may require
that the information called for by subdivisions (1) through (14),
inclusive, of this subsection (b) of this section shall be given
with respect to each partner of the partnership or limited
partnership, each member of the syndicate or group and each person
who controls the partner or member. If any partner, member or
person is a corporation or the person required to file the
statement referred to in subsection (a) of this section is a
corporation, the commissioner may require that the information
called for by subdivisions (1) through (14), inclusive, subsection
(b) of this section shall be given with respect to the corporation
and each person who is directly or indirectly the beneficial owner
of more than ten percent of the outstanding voting securities of
the corporation.

(e)(d) If any material change occurs in the facts set forth
in the statement filed with the commissioner and sent to the
insurer pursuant to this section, an amendment setting forth such
change, together with copies of all documents and other material
relevant to such change, shall be filed with the commissioner and
sent to the insurer within two business days after the person
learns of the change. The insurer shall send the amendment to its
shareholders.

(f)(e) Alternative filing materials. -- If any offer,
request, invitation, agreement or acquisition referred to in
subsection (a) of this section is proposed to be made by means of
a registration statement under the Securities Act of 1933 or in
circumstances requiring the disclosure of similar information under
the Securities Exchange Act of 1934 or under a state law requiring
similar registration or disclosure, the person required to file the
statement referred to in saidthat subsection may utilize such
documents in furnishing the information called for by that
statement.

(g)(f) (1) Approval by commissioner; hearings. -- The
commissioner shall approve any merger or other acquisition of
control referred to in subsection (a) of this section unless, after
a public hearing thereon, he or she finds that: any of the
following conditions exists:

(1)(A) After the change of control the domestic insurer
referred to in subsection (a) of this section would not be able to
satisfy the requirements for the issuance of a license to write the
line or lines of insurance for which it is presently authorized;

(2)(B) The effect of the merger or other acquisition of
control would be substantially to lessen competition in insurance
in this state or tend to create a monopoly therein. In applying the
competitive standard in this subdivision:

(i) The informational requirements of subdivision (1),
subsection (c), section three-a of this article and the standards
of subdivision (2), subsection (d), section three-a of this article
apply;

(ii) The merger or other acquisition may not be disapproved if
the commissioner finds that any of the situations meeting the
criteria provided by subdivision (3), subsection (d), section
three-a of this article exist; and

(iii) The commissioner may condition the approval of the
merger or other acquisition on the removal of the basis of
disapproval within a specified period of time.

(3)(C) The financial condition of any acquiring party is such
as might jeopardize the financial stability of the insurer or
prejudice the interest of its policyholders or the interests of any
remaining security holders who are unaffiliated with the acquiring
party;

(4) The terms of the offer, request, invitation, agreement or
acquisition referred to in subsection (a) of this section are
unfair and unreasonable to the security holders of the insurer;

(5)(D) The plans or proposals which the acquiring party has
to liquidate the insurer, sell its assets or consolidate or merge
it with any person or to make any other material change in its
business or corporate structure or management are unfair and
unreasonable to policyholders of the insurer and not in the public
interest;

(6)(E) The competence, experience and integrity of those
persons who would control the operation of the insurer are such
that it would not be in the interest of policyholders of the
insurer and of the public to permit the merger or other acquisition
of control; or

(7)(F) The acquisition is likely to be hazardous or
prejudicial to the insurance-buying public.

(h)(2) The public hearing required by this section shall be
held within fortythirty days after the statement required by
subsection (a) of this section is filed, and at least fifteentwenty days' notice thereof shall be given by the commissioner to
the person filing the statement. Not less than seven days’ notice
of the public hearing shall be given by the person filing the
statement to the insurer and to any other persons as may be
designated by the commissioner. The insurer shall give notice of
the public hearing to its security holders. The commissioner shall
make a determination within twenty days after the conclusion of the
hearingthe sixty-day period preceding the effective date of the
proposed transaction. At the hearing, the person filing the
statement, the insurer, any person to whom notice of hearing was
sent, and any other person whose interest may be affected has the
right to present evidence, examine and cross-examine witnesses, and
offer oral and written arguments and in connection therewith shall
be entitled to conduct discovery proceedings in the same manner as
is presently allowed in the circuit courts of this state:
Provided, That all discovery proceedings shall be concluded not
later than three days prior to the commencement of the public
hearing.

(3) If the proposed acquisition of control will require the
approval of more than one commissioner, a public hearing pursuant
to this subsection may be held on a consolidated basis upon request
of the person filing the statement referred to in subsection (a) of
this section. That person shall file the statement referred to in
subsection (a) of this section with the National Association of
Insurance Commissioners within five days of making the request for
a public hearing. A commissioner may opt out of a consolidated
hearing, and shall provide notice to the applicant of the opt-out
within ten days of the receipt of the statement referred to in
subsection (a) of this section. A hearing conducted on a
consolidated basis shall be public and shall be held within the
United States before the commissioners of the states in which the
insurers are domiciled. Such commissioners shall hear and receive
evidence. A commissioner may attend the hearing, in person or by
telecommunication.

(4) In connection with a change of control of a domestic
insurer, any determination by the commissioner that the person
acquiring control of the insurer is required to maintain or restore
the capital of the insurer to the level required by the laws of
this state shall be made not later than sixty days after the date
of filing the change in control submitted pursuant to subdivision
(1), subsection (a) of this section.

(i)(5) The commissioner may retain at the acquiring person’s
expense any attorneys, actuaries, accountants and other experts not
otherwise a part of the commissioner’s staff as may be reasonably
necessary to assist the commissioner in reviewing the proposed
acquisition of control.

(j) To the extent permitted by applicable federal laws, rules
and regulations, all statements, amendments or other material filed
pursuant to the provisions of this section and all notices of
public hearings held pursuant to the provisions of this section
shall be mailed by the insurer to its shareholders within five
business days after the insurer has received such statements,
amendments, other material or notices. The expenses of mailing
shall be borne by the person making the filing. As security for
the payment of such expenses, such person shall file with the
commissioner an acceptable bond or other deposit in an amount to be
determined by the commissioner.

(k)(g) Exemptions. –- The provisions of this section shall
not apply to any offer, request, invitation, agreement or
acquisition which the commissioner by order shall exempt therefrom
as: (1) Not having been made or entered into for the purpose of,
and not having the effect of, changing or influencing the control
of a domestic insurer; or (2) as otherwise not comprehended within
the purposes of this section.

(l)(h) The following are violations of this section:

(1) The failure to file any statement, amendment or other
material required to be filed pursuant to subsection (a) or (b) of
this section; or

(2) The effectuation or any attempt to effectuate an
acquisition of control of, divestiture of, or merger with, a
domestic insurer unless the commissioner has given his or her
approval thereto.

(m)(i) Jurisdiction; consent to service of process. -- The
courts of this state are hereby vested with jurisdiction over every
person not resident, domiciled or authorized to do business in this
state who files a statement with the commissioner under this
section and over all actions involving such person arising out of
violations of this section and each such person shall be deemed to
have performed acts equivalent to and constituting an appointment
by the person of the Secretary of State to be his or her true and
lawful attorney upon whom may be served all lawful process in any
action, suit or proceeding arising out of violations of this
section. Copies of all such lawful process shall be served on the
Secretary of State and transmitted by registered or certified mail
by the Secretary of State to such person at his or her last known
address.

§33-27-3a. Acquisitions Involving Insurers Not Otherwise Covered.

(a) Definitions. -- The following definitions apply to only
this section:

(1) “Acquisition” means any agreement, arrangement or activity
the consummation of which results in a person acquiring directly or
indirectly the control of another person, and includes, but is not
limited to, the acquisition of voting securities, the acquisition
of assets, bulk reinsurance and mergers.

(2) An “involved insurer” includes an insurer which either
acquires or is acquired, is affiliated with an acquirer or
acquired, or is the result of a merger.

(b) Scope. – (1) Except as exempted in subdivision (2) of this
subsection, this section applies to any acquisition in which there
is a change in control of an insurer authorized to do business in
this state.

(2) This section does not apply to the following:

(A) A purchase of securities solely for investment purposes so
long as the securities are not used by voting or otherwise to cause
or attempt to cause the substantial lessening of competition in any
insurance market in this state. If a purchase of securities
results in a presumption of control pursuant to subsection (c),
section two of this article, it is not solely for investment
purposes unless the commissioner of the insurer’s state of domicile
accepts a disclaimer of control or affirmatively finds that control
does not exist and the disclaimer action or affirmative finding is
communicated by the domiciliary commissioner to the commissioner of
this state;

(B) The acquisition of a person by another person when both
persons are neither directly nor through affiliates primarily
engaged in the business of insurance, if pre-acquisition
notification is filed with the commissioner pursuant to subdivision
(1), subsection (c) of this section thirty days prior to the
proposed effective date of the acquisition. However, such
pre-acquisition notification is not required for exclusion from
this section if the acquisition would otherwise be excluded from
this section by any other paragraph of this subdivision;

(C) The acquisition of already affiliated persons;

(D) An acquisition if, as an immediate result of the
acquisition:

(i) In no market would the combined market share of the
involved insurers exceed five percent of the total market;

(ii) There would be no increase in any market share; or

(iii) In no market would:

(I) The combined market share of the involved insurers exceed
twelve percent of the total market; and

(II) The market share increase by more than two percent of the
total market.

For the purpose of this paragraph, a “market” means direct
written insurance premium in this state for a line of business as
contained in the annual statement required to be filed by insurers
licensed to do business in this state; and

(E) An acquisition for which a pre-acquisition notification
would be required pursuant to this section due solely to the
resulting effect on the ocean marine insurance line of business;

(F) An acquisition of an insurer whose domiciliary
commissioner affirmatively finds that the insurer is in failing
condition; there is a lack of feasible alternative to improving
such condition; the public benefits of improving the insurers
condition through the acquisition exceed the public benefits that
would arise from not lessening competition; and the findings are
communicated by the domiciliary commissioner to the commissioner of
this state.

(c) Pre-acquisition notification and waiting period. -- An
acquisition covered by subsection (b) of this section may be
subject to an order pursuant to subsection (e) of this section
unless the acquiring person files a pre-acquisition notification
and the waiting period has expired. The acquired person may file
a pre-acquisition notification. The commissioner shall give
confidential treatment to information submitted under this
subsection in the same manner as provided in section seven of this
article.

(1) The pre-acquisition notification shall be in such form and
contain such information as prescribed by the National Association
of Insurance Commissioners relating to those markets that, under
paragraph (D), subdivision (2), subsection (b) of this section,
cause the acquisition not to be exempted from the provisions of
this section. The commissioner may require such additional
material and information as deemed necessary to determine whether
the proposed acquisition, if consummated, would violate the
competitive standard of subsection (d) of this section. The
required information may include an opinion of an economist as to
the competitive impact of the acquisition in this state accompanied
by a summary of the education and experience of such person
indicating his or her ability to render an informed opinion.

(2) The waiting period required shall begin on the date of
receipt of the commissioner of a pre-acquisition notification and
shall end on the earlier of the thirtieth day after the date of
receipt, or termination of the waiting period by the commissioner.
Prior to the end of the waiting period, the commissioner on a
one-time basis may require the submission of additional needed
information relevant to the proposed acquisition, in which event
the waiting period shall end on the earlier of the thirtieth day
after receipt of the additional information by the commissioner or
termination of the waiting period by the commissioner.

(d) Competitive Standard. –- (1) The commissioner may enter an
order under subdivision (1), subsection (e) of this section, with
respect to an acquisition if there is substantial evidence that the
effect of the acquisition may be substantially to lessen
competition in any line of insurance in this state or tend to
create a monopoly or if the insurer fails to file adequate
information in compliance with subsection (c) of this section.

(2) In determining whether a proposed acquisition would
violate the competitive standard of subdivision (1) of this
subsection, the commissioner shall consider the following:

(A) Any acquisition covered under subsection (b) of this
section involving two or more insurers competing in the same market
is prima facie evidence of violation of the competitive standards.

(i) If the market is highly concentrated and the involved
insurers possess the following shares of the market:

Insurer AInsurer B

four percentfourpercent or more

ten percentten percent

fifteen percentonepercent or more

(ii) Or, if the market is not highly concentrated and the
involved insurers possess the following shares of the market:

Insurer AInsurer B

five percentfive percent or more

ten percentfour percent or more

fifteen percentthree percent or more

nineteen percentone percent or more

A highly concentrated market is one in which the share of the
four largest insurers is seventy-five percent or more of the
market. Percentages not shown in the tables are interpolated
proportionately to the percentages that are shown. If more than
two insurers are involved, exceeding the total of the two columns
in the table is prima facie evidence of violation of the
competitive standard in subdivision one of this subsection. For
the purpose of this item, the insurer with the largest share of the
market shall be deemed to be Insurer A;

(B) There is a significant trend toward increased
concentration when the aggregate market share of any grouping of
the largest insurers in the market, from the two largest to the
eight largest, has increased by seven percent or more of the market
over a period of time extending from any base year five to ten
years prior to the acquisition up to the time of the acquisition.
Any acquisition or merger covered under subsection (b) of this
section involving two (2) or more insurers competing in the same
market is prima facie evidence of violation of the competitive
standard in subdivision (1) of this subsection if:

(i) There is a significant trend toward increased
concentration in the market;

(ii) One of the insurers involved is one of the insurers in a
grouping of large insurers showing the requisite increase in the
market share; and

(iii) Another involved insurer’s market is two percent or
more;

(C) For the purposes of subdivision (2), subsection (d) of
this section:

(i) The term “insurer” includes any company or group of
companies under common management, ownership or control;

(ii) The term “market” means the relevant product and
geographical markets. In determining the relevant product and
geographical markets, the commissioner shall give due consideration
to, among other things, the definitions or guidelines, if any,
promulgated by the National Association of Insurance Commissioners
and to information, if any, submitted by parties to the
acquisition. In the absence of sufficient information to the
contrary, the relevant product market is assumed to be the direct
written insurance premium for a line of business, such line being
that used in the annual statement required to be filed by insurers
doing business in this state, and the relevant geographical market
is assumed to be this state;

(iii) The burden of showing prima facie evidence of violation
of the competitive standard rests upon the commissioner.

(D) Even though an acquisition is not prima facie violative of
the competitive standard under paragraphs (A) and (B), subdivision
(2) of this subsection, the commissioner may establish the
requisite anticompetitive effect based upon other substantial
evidence. Even though an acquisition is prima facie violative of
the competitive standard under paragraphs (A) and (B), subdivision
(2) of this subsection, a party may establish the absence of the
requisite anticompetitive effect based upon other substantial
evidence. Relevant factors in making a determination under this
paragraph include, but are not limited to, the following: market
shares, volatility of ranking of market leaders, number of
competitors, concentration, trend of concentration in the industry,
and ease of entry and exit into the market.

(3) An order may not be entered under subdivision (1).
subsection (e) of this section if:

(A) The acquisition will yield substantial economies of scale
or economies in resource utilization that cannot be feasibly
achieved in any other way, and the public benefits which would
arise from such economies exceed the public benefits which would
arise from not lessening competition; or

(B) The acquisition will substantially increase the
availability of insurance, and the public benefits of the increase
exceed the public benefits which would arise from not lessening
competition.

(e) Orders and Penalties. –- (1)(A) If an acquisition violates
the standards of this section, the commissioner may enter an order:

(i) Requiring an involved insurer to cease and desist from
doing business in this state with respect to the line or lines of
insurance involved in the violation; or

(ii) Denying the application of an acquired or acquiring
insurer for a license to do business in this state.

(B) Such an order shall not be entered unless:

(i) There is a hearing;

(ii) Notice of the hearing is issued prior to the end of the
waiting period and not less than fifteen days prior to the hearing;
and

(iii) The hearing is concluded and the order is issued no
later than sixty days after the date of the filing of the
preacquisition notification with the commissioner.

(C) Every order issued pursuant to this subsection shall be
accompanied by a written decision of the commissioner setting forth
findings of fact and conclusions of law.

(D) An order pursuant to this subsection does not apply if the
acquisition is not consummated.

(2) Any person who violates a cease and desist order of the
commissioner under subdivision one of this subsection and while the
order is in effect may, after notice and hearing and upon order of
the commissioner, be subject at the discretion of the commissioner
to one or more of the following:

(A) A monetary penalty of not more than $10,000 for every day
of violation; or

(B) Suspension or revocation of the person’s license.

(3) Any insurer or other person who fails to make any filing
required by this section, and who also fails to demonstrate a good
faith effort to comply with any filing requirement, shall be
subject to a fine of not more than $50,000.

(f) Inapplicable Provisions. Subsections (b) and (c), section
ten of this article and section twelve of this article do not apply
to acquisitions covered under subsection (b) of this section.

§33-27-4. Registration of insurers.

(a) Registration. -- (1) Every insurer which is authorized to
do business in this state and which is a member of an insurance
holding company system shall register with the commissioner, except
a foreign insurer subject to disclosure requirements and standards
adopted by statute or regulation in the jurisdiction of its
domicile which are substantially similar to those contained in this
section, subsections (a), (b) and (c), section five of this
article, and either subsection (d), section five of this article or
has a provision such as the following: “Each registered insurer
shall keep current the information required to be disclosed in its
registration statement by reporting all material changes or
additions within fifteen days after the end of the month in which
it learns of each change or addition.”

(2) Any insurer which is subject to registration under this
section shall register within sixty days after the effective date
of this article or fifteen days after it becomes subject to
registration, whichever is later, and annually thereafter by June
1 of each year for the previous calendar year, unless the
commissioner for good cause shown extends the time for
registration. and then within such extended time. The commissioner
may require any authorized insurer which is a member of a holding
company system which is not subject to registration under this
section to furnish a copy of the registration statement, the
summary described in subsection (c) of this section, or other
information filed by such insurance company with the insurance
regulatory authority of domiciliary jurisdiction.

(b) Information and form required. –- Every insurer subject
to registration shall file a registration statement with the
commissioner and the national association of insurance
commissioners on a form and in a format prescribed by the National
Association of Insurance Commissioners, which shall contain the
following current information: about:

(1) The capital structure, general financial condition,
ownership and management of the insurer and any person controlling
the insurer.

(2) The identity and relationship of every member of the
insurance holding company system.

(3) The following agreements in force, relationships
subsisting, and transactions currently outstanding or which have
occurred during the last calendar year between such insurer and its
affiliates:

(A) Loans, other investments, or purchases, sales or exchanges
of securities of the affiliates by the insurer or of the insurer by
its affiliates;

(B) Purchases, sales or exchanges of assets;

(C) Transactions not in the ordinary course of business;

(D) Guarantees or undertakings for the benefit of an affiliate
which result in an actual contingent exposure of the insurer's
assets to liability, other than insurance contracts entered into in
the ordinary course of the insurer's business;

(E) All management and service contracts and all cost-sharing
arrangements;

(F) All reinsurance agreements;

(G) Dividends and other distributions to shareholders; and

(H) Consolidated tax allocation statements.

(H)(4) Any pledge of the insurer's stock, including stock of
any subsidiary or controlling affiliate, for a loan made to any
member of the insurance holding company system.

(5) If requested by the commissioner, the insurer shall
include financial statements of or within an insurance holding
company system, including all affiliates. Financial statements may
include, but are not limited to, annual audited financial
statements filed with the U.S. Securities and Exchange Commission
(SEC) pursuant to the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended. An insurer required
to file financial statements pursuant to this subdivision may
satisfy the request by providing the commissioner with the most
recently filed parent corporation financial statements that have
been filed with the SEC.

(4)(6) Other matters concerning transactions between
registered insurers and any affiliates as may be included from time
to time in any registration forms adopted or approved by the
commissioner.

(7) Statements that the insurer’s board of directors is
responsible for and oversees corporate governance and internal
controls and that the insurer’s officers or senior management have
approved, implemented, and continue to maintain and monitor
corporate governance and internal control procedures.

(8) Any other information required by the commissioner by
rule.

(c) Summary of changes to registration statement. -- All
registration statements shall contain a summary outlining all items
in the current registration statement representing changes from the
prior registration statement.

(d) Materiality. -- Information need not be disclosed on the
registration statement filed pursuant to subsection (b) of this
section if such information is not material for the purpose of this
section. Unless the commissioner by rule or order provides
otherwise, sales, purchases, exchanges, loans or extensions of
credit, or investments, involving one half of one percent or less
of an insurer's admitted assets as of December 31, next preceding
shall not be deemed material for purposes of this section.

(e) Each registered insurer shall keep current the information
required to be disclosed in its registration statement by reporting
all material changes or additions on amendment forms provided by
the commissioner within fifteen days after the end of the month in
which it learns of each such change or addition.

(f)(e) Reporting of dividends to shareholders. –- Subject to
subsection (c), section five of this article, each registered
insurer shall report to the commissioner all dividends and other
distributions to shareholders within fifteen business days
following the declaration thereof.

(g)(f) Information to insurers. -- Any person within an
insurance holding company system subject to registration shall be
required to provide complete and accurate information to an
insurer, when such information is reasonably necessary to enable
the insurer to comply with the provisions of this article.

(h)(g) Termination of registration. -- The commissioner shall
terminate the registration of any insurer which demonstrates that
it no longer is a member of an insurance holding company system.

(i) (h) Consolidated filing. -- The commissioner may require
or allow two or more affiliated insurers subject to registration
hereunder to file a consolidated registration statement or
consolidated reports amending their consolidated registration
statement or their individual registration statements.

(j)(i) Alternative registration. –- The commissioner may
allow an insurer which is authorized to do business in this state
and which is a part of an insurance holding company system to
register on behalf of any affiliated insurer which is required to
register under subsection (a) of this section and to file all
information and material required to be filed under this section.

(k)(j) Exemptions. -- The provisions of this section shall
not apply to any insurer, information or transaction if and to the
extent that the commissioner by rule or order shall exempt the same
from the provisions of this section.

(l)(k) Disclaimer. -- Any person may file with the
commissioner a disclaimer of affiliation with any authorized
insurer or such a disclaimer may be filed by suchthe insurer or
any member of an insurance holding company system. The disclaimer
shall fully disclose all material relationships and bases for
affiliation between suchthe person and suchthe insurer as well as
the basis for disclaiming such affiliation. After a disclaimer has
been filed, the insurer shall be relieved of any duty to register
or report under this section which may arise out of the insurer's
relationship with such person unless and until the commissioner
disallows such a disclaimer.A disclaimer of affiliation shall be
deemed to have been granted unless the commissioner, within thirty
days following receipt of a complete disclaimer, notifies the
filing party the disclaimer is disallowed. In the event of
disallowance, the disclaiming party may request an administrative
hearing, which shall be granted, andThethe commissioner shall
disallow such a disclaimer only after furnishing all parties in
interest with notice and opportunity to be heard and after making
specific findings of fact to support such disallowance. The
disclaiming party shall be relieved of its duty to register under
this section if approval of the disclaimer has been granted by the
commissioner, or if the disclaimer is deemed to have been approved.

(l) Enterprise Risk Filing. –- The ultimate controlling
person of every insurer subject to registration shall also file an
annual enterprise risk report. The report shall, to the best of the
ultimate controlling person’s knowledge and belief, identify the
material risks within the insurance holding company system that
could pose enterprise risk to the insurer. The report shall be
filed with the lead state commissioner of the insurance holding
company system as determined by the procedures within the Financial
Analysis Handbook adopted by the National Association of Insurance
Commissioners.

(m) Violations. –- The failure to file a registration
statement or any amendmententerprise risk filing thereto required
by this section within the time specified for such filing shall be
a violation of this section.

§33-27-5. Standards.

(a) Transactions by registered insurers with their affiliateswithin an insurance holding company system to which an insurer
subject to registration is a party shall be subject to the
following standards:

(1) The terms shall be fair and reasonable;

(2) Agreements for cost-sharing services and management shall
include such provisions as required by rule;

(2)(3) Charges or fees for services performed shall be
reasonable;

(3)(4) Expenses incurred and payment received shall be
allocated to the insurer in conformity with customary insurance
accounting practices consistently applied;

(4)(5) The books, accounts and records of each party to all
such transactions shall be so maintained as to clearly and
accurately disclose the precise nature and details of the
transactions, including such accounting information as is necessary
to support the reasonableness of the charges or fees to the
respective parties; and

(5)(6) The insurer's surplus as regards policyholders
following any dividends or distributions to shareholder affiliates
shall be reasonable in relation to the insurer's outstanding
liabilities and adequate to its financial needs.

(b) Adequacy of surplus. –- For purposes of this article, in
determining whether an insurer's surplus as regards policyholders
is reasonable in relation to the insurer's outstanding liabilities
and adequate to meet its financial needs, the following factors,
among others, shall be considered:

(1) The size of the insurer as measured by its assets, capital
and surplus, reserves, premium writings, insurance in force and
other appropriate criteria;

(2) The extent to which the insurer's business is diversified
among the several lines of insurance;

(3) The number and size of risks insured in each line of
business;

(4) The extent of the geographical dispersion of the insurer's
insured risks;

(5) The nature and extent of the insurer's reinsurance
program;

(6) The quality, diversification and liquidity of the
insurer's investment portfolio;

(7) The recent past and projected future trend in the size of
the insurer's surplus as regards policyholders;

(8) The surplus as regards policyholders maintained by other
comparable insurers;

(9) The adequacy of the insurer's reserves; and

(10) The quality and liquidity of investments in affiliates.
The commissioner may treat any such investment as a disallowed
asset for purposes of determining the adequacy of surplus as
regards policyholders whenever in his or her judgment such
investment so warrants.

(c) Dividends and other distributions. – (1)An insurer
subject to registration under section four of this article shallnotNo domestic insurer may pay any extraordinary dividend or make
any other extraordinary distribution to its shareholders until:

(1)(A) Thirty days after the commissioner has received notice
of the declaration thereof and has not within suchthat period
disapproved such payment; or

(d)(2) For purposes of this section, an extraordinary
dividend or distribution includes any dividend or distribution of
cash or other property, whose fair market value together with that
of other dividends or distributions made within the preceding
twelve months exceeds the lesser of:

(1)(A) Ten percent of such insurer's surplus as regards
policyholders as of December 31, next preceding; or

(2)(B)theThe net gain from operations of such insurer, if
such insurer is a life insurer, or the net income, if suchthe
insurer is not a life insurer, not including realized capital
gains, for the twelve-month period ending December 31, next
preceding, but shall not include pro rata distributions of any
class of the insurer's own securities. In determining whether a
dividend or distribution is extraordinary, an insurer other than a
life insurer may carry forward net income from the previous two
calendar years that has not already been paid out as dividends.
This carry-forward shall be computed by taking the net income from
the second and third preceding calendar years, not including
realized capital gains, less dividends paid in the second and
immediate preceding calendar years.

(e)(3) Notwithstanding any other provision of law, an insurer
may declare an extraordinary dividend or distribution which is
conditional upon the commissioner's approval thereof, and such a
the declaration shall confer no rights upon shareholders until: (1)(A) The commissioner has approved the payment of such
dividend or distribution; or

(2) the(B) The commissioner has not disapproved such payment
within the thirty-day period referred to above.

(f)(d) The following transactions involving a domestic
insurer and any person in its insurance holding company system,
including amendments or modifications of affiliate agreements
previously filed pursuant to this section, that are subject to any
materiality standards contained in subdivisions (1) through (5) of
this subsection, may not be entered into unless the insurer has
notified the commissioner in writing of its intention to enter into
suchthe transaction at least thirty days prior thereto, or such
shorter period as the commissioner may permit, and the commissioner
has not disapproved it within suchthat period: Provided, That
nothing contained in this subsection shall be deemed to authorize
or permit any transactions which, in the case of an insurer not a
member of the same holding company system, would be otherwise
contrary to law. The notice for amendments or modifications shall
include the reasons for the change and the financial impact on the
domestic insurer. Informal notice shall be reported, within thirty
days after a termination of a previously filed agreement, to the
commissioner for determination of the type of filing required, if
any.

(1) Sales, purchases, exchanges, loans or extensions of
credit, guarantees or investments provided such transactions are
equal to or exceed:

(A) With respect to nonlife insurers, the lesser of onethree
percent of the insurer's admitted assets or tentwenty-five percent
of surplus as regards policyholders; and

(B)eachWith respect to life insurers, three percent of the
insurer’s admitted assets as of December 31, next preceding;

(2) Loans or extensions of credit to any person who is not an
affiliate, where the insurer makes suchthe loans or extensions of
credit with the agreement or understanding that the proceeds of
such transactions, in whole or in substantial part, are to be used
to make loans or extensions of credit to, purchase assets of, or to
make investments in, any affiliate of the insurer making such loans
or extensions of credit provided suchthe transactions are equal to
or exceed:

(A) With respect to nonlife insurers, the lesser of onethree
percent of the insurer's admitted assets or tentwenty-five percent
of surplus as regards policyholders; each as of December 31, next
preceding;

(B) With respect to life insurers, three percent of the
insurer’s admitted assets as of December 31, next preceding;

(3) Reinsurance agreements or modifications thereto,
including:

(A) All reinsurance pooling agreements; and

(B) Agreements in which the reinsurance premium or a change in
the insurer's liabilities, or the projected reinsurance premium or
a change in the insurer's liabilities in any of the next three
years, equals or exceeds five percent of the insurer's surplus as
regards policyholders, as of December 31, next preceding, including
those agreements which may require as consideration the transfer of
assets from an insurer to a nonaffiliate, if an agreement or
understanding exists between the insurer and nonaffiliate that any
portion of suchthe assets will be transferred to one or more
affiliates of the insurer;

(5) Guarantees when made by a domestic insurer; Provided,
That a guarantee that is quantifiable as to amount is not subject
to the notice requirements of this subdivision unless it exceeds
the lesser of one half of one percent of the insurer’s admitted
assets or ten percent of surplus as regards policyholders as of
December 31, next preceding: Provided, however, That all
guarantees that are not quantifiable as to amount are subject to
the notice requirements of this subdivision.

(6) Direct or indirect acquisitions or investments in a person
that controls the insurer or in an affiliate of the insurer in an
amount which, together with its present holdings in such
investments, exceeds two and one-half percent of the insurer’s
surplus to policyholders. Direct or indirect acquisitions or
investments in subsidiaries acquired pursuant to section two of
this article or authorized under any other section of this chapter,
or in nonsubsidiary insurance affiliates that are subject to the
provisions of this article, are exempt from this requirement; and

(5)(7) Any material transactions, specified by rule, which
the commissioner determines may adversely affect the interests of
the insurer's policyholders.

(g) Nothing contained in subsection (h) herein shall be deemed
to authorize or permit any transactions which, in the case of an
insurer not a member of the same holding company system, would be
otherwise contrary to law.

(h)(e) A domestic insurer shallmay not enter into
transactions which are part of a plan or series of like
transactions with persons within the insurance holding company
system if the purpose of those separate transactions is to avoid
the statutory threshold amount and thus avoid the review that would
occur otherwise. If the commissioner determines that such separate
transactions were entered into over any twelve-month period for
suchthat purpose, he or she may exercise his or her authority
under section nine of this article.

(i)(f) The commissioner, in reviewing transactions pursuant
to subsection (f)(d) of this section, shall consider whether the
transactions comply with the standards set forth in subsection (a)
of this section and whether they may adversely affect the interests
of policyholders.

(j)(g) The commissioner shall be notified within thirty days
of any investment of the domestic insurer in any one corporation if
the total investment in suchthat corporation by the insurance
holding company system exceeds ten percent of such corporation's
voting securities.

(k)(h)With regard to domestic insurers, the following
requirements apply:Management of domestic insurers subject to
registration. –- (1) Notwithstanding the control of a domestic
insurer by any person, the officers and directors of the insurer
shall not thereby be relieved of any obligation or liability to
which they would otherwise be subject by law, and the insurer shall
be managed so as to assure its separate operating identity
consistent with the provisions of this chapterarticle.

(2) Nothing herein shall precludein this section precludes a
domestic insurer from having or sharing a common management or
cooperatively, or jointly using personnel, property or services
with one or more other persons under arrangements meeting the
standards of subsection (a) of this section.

(3) Not less than one third of the directors of a domestic
insurer, and not less than one third of the members of each
committee of the board of directors of any domestic insurer, shall
be persons who are not officers or employees of the insurer or of
any entity controlling, controlled by, or under common control with
the insurer and who are not beneficial owners of a controlling
interest in the voting stock of the insurer or entity. At least
one such person must be included in any quorum for the transaction
of business at any meeting of the board of directors or any
committee thereof.

(4) The board of directors of a domestic insurer shall
establish one or more committees comprised solely of directors who
are not officers or employees of the insurer or of any entity
controlling, controlled by, or under common control with the
insurer and who are not beneficial owners of a controlling interest
in the voting stock of the insurer or any such entity. The
committee or committees have responsibility for nominating
candidates for director for election by shareholders or
policyholders, evaluating the performance of officers deemed to be
principal officers of the insurer and recommending to the board of
directors the selection and compensation of the principal officers.
(5) The provisions of subdivisions three and four of this
subsection do not apply to a domestic insurer if the person
controlling the insurer, such as an insurer, a mutual insurance
holding company, or a publicly held corporation, has a board of
directors and committees thereof that meet the requirements of such
subdivisions with respect to such controlling entity.

(6) An insurer may make application to the commissioner for a
waiver from the requirements of this subsection, if the insurer’s
annual direct written and assumed premium, excluding premiums
reinsured with the Federal Crop Insurance Corporation and Federal
Flood Program, is less than $300 million. An insurer may also make
application to the commissioner for a waiver from the requirements
of this subsection based upon unique circumstances. The
commissioner may consider various factors including, but not
limited to, the type of business entity, volume of business
written, availability of qualified board members, or the ownership
or organizational structure of the entity.

§33-27-6. Examination.

(a)Power of commissioner. -- Subject to the limitation
contained in this section and in addition to the powers which the
commissioner has under other articlesprovisions of this chapter
relating to the examination of insurers, the commissioner shall
also havehas the power to examine any insurer registered under
section four of this article and its affiliates to ascertain the
financial condition of the insurer, including the enterprise risk
to the insurer by the ultimate controlling party, or by any entity
or combination of entities within the insurance holding company
system, or by the insurance holding company system on a
consolidated basis.

(b) Access to books and records. –

(1) The commissioner mayorder any insurer registered under
section four of this article to produce such records, books or
other information papers in the possession of the insurer or its
affiliates as shall beare reasonably necessary to ascertain the
financial condition or legality of conduct of such insurer. In the
event that such insurer fails to comply with such order, the
commissioner shall have the power to examine such affiliates to
obtain such informationdetermine compliance with this chapter.

(b)Purpose and limitation of examination. -- The
commissioner shall exercise his power under subsection (a) above
only if the examination of the insurer under other articles of this
chapter is inadequate or the interests of the policyholders of such
insurer may be adversely affected.

(2) To determine compliance with this chapter, the
commissioner may order any insurer registered under section four of
this article to produce information not in the possession of the
insurer if the insurer can obtain access to such information
pursuant to contractual relationships, statutory obligations, or
other method. In the event the insurer cannot obtain the
information requested by the commissioner, the insurer shall
provide the commissioner a detailed explanation of the reason that
the insurer cannot obtain the information and the identity of the
holder of information. Whenever it appears to the commissioner
that the detailed explanation is without merit, the commissioner
may, after notice and hearing, require the insurer to pay a penalty
of up to $10,000 for each day's delay, may suspend or revoke the
insurer's license, or both impose a penalty and revoke or suspend
the insurer’s license.

(c) Use of consultants. -- The commissioner may retain at the
registered insurer's expense such attorneys, actuaries, accountants
and other experts not otherwise a part of the commissioner's staff
as shall be reasonably necessary to assist in the conduct of the
examination under subsection (a) aboveof this section. Any person
so retained shall be under the direction and control of the
commissioner and shall act in a purely advisory capacity.

(d) Expenses. -- Each registered insurer producing for
examination records, books and papers pursuant to subsection (a)
above shall beof this section is liable for and shall pay the
expense of such examination in accordance with applicable laws of
this state.

(e) Compelling Production. –- In the event the insurer fails
to comply with an order, the commissioner may examine the affiliates
to obtain the information. The commissioner may also issue
subpoenas, to administer oaths, and examine under oath any person
for purposes of determining compliance with this section. Upon the
failure or refusal of any person to obey a subpoena, the
commissioner may petition any circuit court and, upon proper
showing, the court may enter an order compelling the witness to
appear and testify or produce documentary evidence. Failure to obey
the court order is punishable as contempt of court. Every person
is obliged to attend as a witness at the place specified in the
subpoena, when subpoenaed, anywhere within the state. He or she is
entitled to the same fees and mileage, if claimed, as a witness in
the circuit court of the county in which attendance is required,
which fees, mileage, and actual expense, if any, necessarily
incurred in securing the attendance of witnesses, and their
testimony, shall be itemized and charged against, and be paid by,
the company being examined.

§33-27-6a. Supervisory Colleges.

(a) Power of Commissioner. –- With respect to any insurer
registered under section four of this article, and in accordance
with subsection (c) of this section, the commissioner may
participate in a supervisory college for any domestic insurer that
is part of an insurance holding company system with international
operations in order to determine compliance by the insurer with this
chapter. The powers of the commissioner with respect to supervisory
colleges include, but are not limited to, the following:

(1) Initiating the establishment of a supervisory college;

(2) Clarifying the membership and participation of other
supervisors in the supervisory college;

(3) Clarifying the functions of the supervisory college and the
role of other regulators, including the establishment of a
group-wide supervisor;

(4) Coordinating the ongoing activities of the supervisory
college, including planning meetings, supervisory activities, and
processes for information sharing; and

(5) Establishing a crisis management plan.

(b) Expenses. – Each registered insurer subject to this
section is liable for and shall pay the reasonable expenses of the
commissioner’s participation in a supervisory college in accordance
with subsection (c) of this section, including reasonable travel
expenses. For purposes of this section, a supervisory college may
be convened as either a temporary or permanent forum for
communication and cooperation between the regulators charged with
the supervision of the insurer or its affiliates, and the
commissioner may establish a regular assessment to the insurer for
the payment of these expenses.

(c) Supervisory College. –- In order to assess the business
strategy, financial position, legal and regulatory position, risk
exposure, risk management and governance processes, and as part of
the examination of individual insurers in accordance with section
six of this article, the commissioner may participate in a
supervisory college with other regulators charged with supervision
of the insurer or its affiliates, including other state, federal and
international regulatory agencies. The commissioner may enter into
agreements in accordance with subsection (c), section seven of this
article providing the basis for cooperation between the commissioner
and the other regulatory agencies, and the activities of the
supervisory college: Provided, That this section may not be
construed as delegating to the supervisory college the authority of
the commissioner to regulate or supervise the insurer or its
affiliates within its jurisdiction.

§33-27-7. Confidential treatment.

(a)All information, documents and copies thereofDocuments,
materials or other information in the possession or control of the
commissioner that are obtained by or disclosed to the commissioner
or any other person in the course of an examination or investigation
made pursuant to section six of this article and all information
reported pursuant to subdivision thirteen or fourteen, subsection
(b), section three of this article,sectionssection four andor
section five of this article shall be givenis confidential
treatment and are not subject to subpoena and may not be made public
by the commissioner or any other person, except to insurance
departments of other states and to the board of Governors of the
federal reserve system or other appropriate federal banking agency
in accordance with section nineteen, article two of this chapter,by law and privileged, is exempt from disclosure pursuant to chapter
twenty-nine-b of this code, is not open to public inspection, is not
subject to subpoena, is not subject to discovery or admissible in
evidence in any criminal, private civil or administrative action and
is not subject to production pursuant to court order: Provided, That
the commissioner is authorized to use the documents, materials or
other information in the furtherance of any regulatory or legal
action brought as part of the commissioner’s official duties.The
commissioner may not otherwise make the documents, materials or
other information public without the prior written consent of the
insurer to which it pertains unless the commissioner, after giving
the insurer and its affiliates who would be affected thereby notice
and opportunity to be heard, determines that the interests of
policyholders, shareholders or the public will be served by the
publication thereof, in which event he or she may publish all or any
part thereof in any manner as he or she may consider appropriate.

(b) Neither the commissioner nor any person who received
documents, materials or other information while acting under the
authority of the commissioner or with whom such documents, materials
or other information are shared pursuant to this article may be
permitted or required to testify in any private civil action
concerning any confidential documents, materials, or information
subject to subsection (a) of this section.

(c) In order to assist in the performance of the commissioner’s
duties, the commissioner:

(1) May share documents, materials or other information,
including the confidential and privileged documents, materials or
information subject to subsection (a) of this section, with other
state, federal and international regulatory agencies, with the
National Association of Insurance Commissioners and its affiliates
and subsidiaries, and with state, federal, and international law
enforcement authorities, including members of any supervisory
college described in section six-a of this article, if the recipient
agrees in writing to maintain the confidentiality and privileged
status of the document, material or other information, and has
verified in writing the legal authority to maintain confidentiality;

(2) Notwithstanding subdivision (1) of this subsection, the
commissioner may only share confidential and privileged documents,
material, or information reported pursuant to subsection (l),
section four of this article, with commissioners of states having
statutes or regulations substantially similar to subdivision (1) of
this subsection and who have agreed in writing not to disclose such
information;

(3) May receive documents, materials or information, including
otherwise confidential and privileged documents, materials or
information from the National Association of Insurance Commissioners
and its affiliates and subsidiaries and from regulatory and law-enforcement officials of other foreign or domestic jurisdictions,
and shall maintain as confidential or privileged any document,
material or information received with notice or the understanding
that it is confidential or privileged under the laws of the
jurisdiction that is the source of the document, material or
information; and

(4) Shall enter into written agreements with the National
Association of Insurance Commissioners governing sharing and use of
information provided pursuant to this article consistent with this
subsection that:

(A) Specify procedures and protocols regarding the
confidentiality and security of information shared with the National
Association of Insurance Commissioners and its affiliates and
subsidiaries pursuant to this article, including procedures and
protocols for sharing by the National Association of Insurance
Commissioners with other state, federal or international regulators;

(B) Specify that ownership of information shared with the
National Association of Insurance Commissioners and its affiliates
and subsidiaries pursuant to this article remains with the
commissioner, and the National Association of Insurance
Commissioners’s use of the information is subject to the direction
of the commissioner;

(C) Require prompt notice to be given to an insurer whose
confidential information in the possession of the National
Association of Insurance Commissioners pursuant to this article is
subject to a request or subpoena to the National Association of
Insurance Commissioners for disclosure or production; and

(D) Require the National Association of Insurance Commissioners
and its affiliates and subsidiaries to consent to intervention by
an insurer in any judicial or administrative action in which the
National Association of Insurance Commissioners and its affiliates
and subsidiaries may be required to disclose confidential
information about the insurer shared with the National Association
of Insurance Commissioners and its affiliates and subsidiaries
pursuant to this article.

(d) The sharing of information by the commissioner pursuant to
this article does not constitute a delegation of regulatory
authority, and the commissioner is solely responsible for the
administration, execution and enforcement of the provisions of this
article.

(e) No waiver of any applicable privilege or claim of
confidentiality in the documents, materials or information occurs
as a result of disclosure to the commissioner under this section or
as a result of sharing as authorized in subsection (c) of this
section.

(f) Documents, materials or other information in the possession
or control of the National Association of Insurance Commissioners
pursuant to this article is confidential by law and privileged, is
exempt from disclosure pursuant to chapter twenty-nine-b of this
code, is not subject to subpoena, and is not subject to discovery
or admissible in evidence in any private civil action.

§33-27-9. Criminal proceedings; penalties.

(a) Any insurer failing, without just cause, to file any
registration statement as required by this article shall be
required, after notice and hearing, to pay a penalty of up to one
thousand dollars for each day's delay, to be recovered by the
commissioner. Any penalty so recovered shall be paid into the
General Revenue Fund of this state. The commissioner may reduce the
penalty if the insurer demonstrates to the commissioner that the
imposition of the penalty would constitute a financial hardship to
the insurer.

(b) Every director or officer of an insurance holding company
system who knowingly violates, participates in, or assents to, or
who knowingly permits any of the officers or agents of the insurer
to engage in transactions or make investments which have not been
properly reported or submitted pursuant to subsection (a), section
four of this article and subsections (c) and (d), of section five
of this article, or which violate any other provision of this
article, shall pay, in his or her individual capacity, a civil
forfeiture of not more than $5,000 per violation, after notice and
hearing before the commissioner. In determining the amount of the
civil forfeiture, the commissioner shall take into account the
appropriateness of the forfeiture with respect to the gravity of the
violation, the history of previous violations, and such other
matters as justice may require.

(c) Whenever it appears to the commissioner that any insurer
subject to this article or any director, officer, employee or agent
thereof has engaged in any transaction or entered into a contract
which is subject to section five of this article and which would not
have been approved had such approval been requested, the
commissioner may order the insurer to cease and desist immediately
any further activity under that transaction or contract. After
notice and hearing the commissioner may also order the insurer to
void any such contracts and restore the status quo if suchthe
action is in the best interest of the policyholders, creditors or
the public.

(d) Whenever it appears to the commissioner that any person or
any director, officer, employee or agent thereof has committed a
willful violation of this article, the commissioner may cause
criminal proceedings to be instituted against such person or the
responsible director, officer, employee or agent thereof. Any
insurer who willfully violates this article is guilty of a
misdemeanor and, upon conviction thereof, shall be fined not more
than ten thousand dollars. Any individual who willfully violates
this article is guilty of a misdemeanor and, upon conviction
thereof, shall be fined in his or her individual capacity not more
than ten thousand dollars or, if such willful violation involves the
deliberate perpetration of a fraud upon the commissioner, is guilty
of a felony and, upon conviction thereof, shall be imprisoned not
less than one year nor more than three years, or both fined and
imprisoned.

(e) Any officer, director or employee of an insurance holding
company system who willfully and knowingly subscribes to or makes
or causes to be made any false statements or false reports or false
filings with the intent to deceive the commissioner in the
performance of his or her duties under this article, is guilty of
a felony and, upon conviction thereof, shall be fined not more than
ten thousand dollars, or imprisoned not less than one year nor more
than three years, or both fined and imprisoned. Any fines imposed
pursuant to this subsection shall be paid by the officer, director
or employee in his or her individual capacity.

(f) Whenever it appears to the commissioner that any person has
committed a violation of section three of this article which
prevents the full understanding of the enterprise risk to the
insurer by affiliates or by the insurance holding company system,
the violation may serve as an independent basis for disapproving
dividends or distributions and for placing the insurer under an
order of supervision in accordance with article thirty-four of this
chapter.

§33-27-11. Revocation, suspension or nonrenewal of insurer's
license.

Whenever it appears to the commissioner that any person has
committed a violation of this article which makes the continued
operation of an insurer contrary to the interests of policyholders
or the public, the commissioner may, after giving notice and an
opportunity to be heard, determine to suspend, revoke or refuse to
renew such insurer's license or authority to do business in this
state for such period as he or she finds is required for the
protection of policyholders or the public: Provided, That any such
determination shall be accompanied by specific findings of fact and
conclusions of law.

§33-27-14. Regulatory authority.

The Insurance Commissioner shall promulgatemay propose rules
pursuant tofor legislative approval in accordance withthe
provisions ofarticle three, chapter twenty-nine-a of this code
setting forth procedural requirementsand may promulgate emergency
rules pursuant to the provisions of section fifteen, article three,
chapter twenty-nine-a of this code, as are necessary to implement
the provisions of this article. and specifying the reporting forms
required by this article prior to August 1, 1993.

NOTE: The purpose of this bill is to amend the insurance code
to adopt recent changes to the model act adopted by the National
Association of Insurance Commissioners with respect to holding
companies and systemic risks arising from acquisitions and
divestitures of affiliates. The bill defines terms. The bill
excludes certain investments from determination of adequacy of
surplus. The bill requires notice and other information with regard
to divestiture or acquisition of a controlling interest. The bill
also changes public hearing requirements. The bill provides
standards for review of acquisition request by commissioner and
establishes a process for consolidated hearings. The bill
additionally sets forth standards and procedures for certain
acquisitions not otherwise covered. The bill expands the types of
information that may be demanded and reviewed by the commissioner.
Further, the bill provides for establishment of supervisory
colleges. The bill provides for additional confidentiality
measures. The bill also authorizes emergency rules.

Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.

§33-27-3A and §33-27-6A are new; therefore, strike-throughs and
underscoring have been omitted.